Many employers and employment agencies
offer employment information through the Internet, making it possible for a borrower to
register and apply for employment electronically. To accommodate borrowers who may be
using the Internet to seek and apply for employment, the Common Manual will be
modified to allow this information to be used as documentation of the borrowers
search for employment when the borrower is seeking an unemployment deferment. The
requirements for documenting the borrowers search for employment in subsection
7.10.E. of the Common Manual will be expanded as follows:

To obtain an unemployment deferment or an
extension of an unemployment deferment, a borrower must request the deferment or
extension. Each deferment request must contain self-certifying statements from the
borrower that describe the borrowers conscientious search for full-time employment
during the preceding 6 months. If requesting an extension, this description must document
at least six attempts to secure employment during the period to be covered by the
deferment, including (a) the names of the firms contacted, (b) the names or
titles of the persons contacted, and (c) the addresses and telephone numbers of the
firms. An Internet address for the firm or place of employment (e.g., Website or
electronic mail) is an acceptable address if the borrower applied electronically for
employment. As an alternative to certifying employer contacts, a lender may accept
comparable documentation that the borrower has used to meet the requirements of the
Unemployment Insurance Service, provided the documentation shows the same number of
contacts and contains the same information required from the borrower.

The borrower must also demonstrate that
he or she has registered with a public or private employment agency, if one is accessible.
The name and address of the agency and the date of registration with the agency must be
provided if such an agency is accessible. An agency is considered accessible if it is
located within a 50-mile radius of the borrowers residence. An Internet address for
the agency (e.g., Website or electronic mail) is an acceptable address if the borrower
registered electronically with the agency. It may not be presumed that a borrower has
access to an employment agency based on the borrowers providing a firms
Internet address as part of the documentation that the borrower attempted to secure
full-time employment. School placement and temporary help agencies are not considered
employment agencies for the purposes of establishing unemployment deferment eligibility.

This change is effective for unemployment
deferment requests received by the lender on or after November 1, 1997. Earlier
implementation by the lender is acceptable. Subsection 7.10.E. of the Common Manual
will be revised to incorporate this change.

Current Common Manual policy does
not address the release of an endorser from his or her repayment obligation on a loan in
the case of the endorsers death. The Common Manual will be expanded to allow
an endorser to be

released from his or her repayment
obligation on a loan if the endorser dies, and the lender receives evidence of the
endorsers death, such as a copy of the death certificate or other proof of the
endorsers death that is acceptable under applicable state law.

This change is effective for death
certificates or other acceptable documentation received by the lender on or after November
1, 1997. Earlier implementation by the lender is acceptable. Subsection 8.1.E. of the Common
Manual will be revised to reflect this change.

Section 8.10 of the Common Manual
will be revised to clarify that a borrower who has rehabilitated his or her defaulted loan
is eligible for other, more flexible, loan-type-specific repayment schedules after the
lender that purchases the borrowers rehabilitated loan has established an initial
repayment schedule. This change will more closely reflect the regulatory language found in
34 CFR 682.405(a)(3).

The requirements a lender must use for
establishing a repayment schedule upon purchasing a rehabilitated loan will be revised as
follows:

A lender that purchases a rehabilitated
loan must immediately establish a repayment schedule with the borrower that meets the
requirements applicable to other FFELP loans of the same type. The schedule must be sent
to the borrower within 60 days of receiving the loan file, and the first payment due date
must be within 75 days of the receipt of that file. The lender must consider the first
payment made under the 12 consecutive monthly payments required for rehabilitation as the
first payment under the applicable maximum repayment period for the loan type (For
example, a borrower would have a maximum repayment period of 9 years remaining on a loan
with a 10-year repayment period, and a Consolidation loan borrower with a balance greater
than $60,000 would have a maximum repayment period of 29 years, because the 12 consecutive
monthly payments are considered the first year of a repayment term). The initial repayment
schedule must provide for monthly payments that are greater than or equal to the average
of the 12 consecutive monthly payments received by the guarantor. The guarantor will
provide payment history information (such as payment amounts and dates) with the loan
documentation sent to the purchasing lender to assist in the accurate conversion to
repayment. A rehabilitated loan regains the same interest rate and deferment
provisions that were applicable when the loan was first disbursed and repayment terms and
all other benefits applicable to other FFELP loans made under the same loan type.

This change is effective retroactive to
the effective date of the Common Manual. Section 8.10 of the Common Manual
will be revised to incorporate this change.

The Common Manual currently does
not include information about requirements for determining program eligibility and Title
IV eligibility for schools that measure progress in credit hours. The following new
language will be added to the Common Manual to assist schools with this important
task:

Schools that measure progress in credit
hours must determine the Title IV eligibility of their undergraduate programs using the
formulas listed below except in the following cases:

The program is at least 2 academic years
in length and provides an associate, bachelor's, or professional degree or the equivalent,
as determined by the Department. (Note: This exception does not permit a school to ask for
a determination that a nondegree program is equivalent to a degree program).

Each course within the program is
acceptable for full credit toward that schools associate, bachelors , or
professional degree, or a degree that the Department has determined to be equivalent at
the school, and the degree requires at least 2 academic years of study.

The program is offered by a public or
private nonprofit hospital-based school of nursing that awards a diploma at the completion
of the program.

If the program does not meet one of the
preceding three criteria, the school must use the appropriate formula, as follows. Clock
hours used in the formula must comply with the regulatory definition of clock hour in
appendix G of the Common Manual.

To determine the number of credit hours
in a program for Title IV eligibility purposes, schools must use the appropriate formula,
as follows:

For programs measured in semesters or
trimesters

Number of clock hours in the
credit-hour program
30

For programs measured in quarters

Number of clock hours in the
credit-hour program
20

The school must use the resulting number
of equivalent credit hours to determine if a program is eligible under the program
requirements. For a program to qualify as eligible by providing at least 16 semester or
trimester credit hours or 24 quarter credit hours, the program must include at least 480
clock hours of instruction. For a program to qualify as eligible by providing at least 8
semester or trimester credit hours or 12 quarter credit hours, the program must include at
least 240 clock hours of instruction.

A program that fails to include the
minimum number of equivalent semester, trimester, or quarter credit hours of instruction
does not qualify as an eligible program regardless of whether the Department previously
designated that program as an eligible program. A school may not deliver the proceeds of
any loan to a student enrolled in such a program regardless of when that program began.
The school must return to the lender any loan funds delivered to or on behalf of students
enrolled in a program that does not qualify as an eligible program.

In addition, a school must apply the
appropriate formula to determine the amount of Stafford funds that a student who is
enrolled in the program is eligible to receive. Based on this calculation, the school must
determine whether the students educational program constitutes a full academic year,
at least two-thirds of an academic year, at least one-third of an academic year, or less
than one-third of an academic year. The school must then calculate the loan amount that
reflects the length of the students educational program.

The PLUS program does not require loans
to be reduced based on the length of a students educational program. If the school
determines that the student is enrolled in an eligible program, no further action is
necessary. If, however, the student is enrolled in a program the school determines is not
eligible, the school cannot deliver any loan proceeds.

These revised requirements for
determining eligibility for a credit-hour program are effective retroactive to the
effective date of the Common Manual. Subsections 4.1.C., 5.7.B., and 5.7.D. of the Common
Manual will be revised to include this information. Schools may also refer to chapter
3 of The Federal Student Financial Aid Handbook for more information.

Parent: For purposes of
PLUS loan eligibility, a students natural or adoptive mother, father,
court-appointed legal guardian, or the spouse of a parent who remarried if the
spouses income and assets would have been taken into account when calculating a
dependent students expected family contribution.

In addition, the eligibility requirement
for PLUS loans in section 5.4 of the Common Manual will be revised to eliminate the
reference to a stepparents being eligible for a PLUS loan only if he or she is also
the students adoptive parent or legal guardian.

These changes are effective for PLUS
loans certified for periods of enrollment beginning on or after July 1, 1996. This
effective date correlates to previous Common Manual changes to implement the July
1, 1996 regulations.

The Common Manual will be modified
to clarify that a borrower who is requesting an unemployment deferment and who resides on
a U.S. military base in a foreign country or on a U.S. embassy compound in a foreign
country because his or her spouse is stationed there must provide documentation equivalent
to that required of other borrowers describing the borrowers conscientious search
for full-time employment. However, when identifying employment contacts, the "name of
the firm" may be, for example, the U.S. military base employment office or U.S.
embassy personnel office. These borrowers are not required to comply with the requirement
that they document further attempts to secure employment during the period of
certification, if the borrower has sought employment with the U.S. military base
employment office, the U.S. embassy personnel office or their equivalent.

This change is effective for unemployment
deferment requests received by the lender on or after January 1, 1998. Lenders are
encouraged to implement this policy earlier. Subsection 7.10.E. of the Common Manual
will be revised to reflect this change.

The Common Manual currently
provides for discharge of a borrowers loan if a borrower dies or, in the case of a
PLUS loan, if the dependent student for whom a parent obtained a PLUS loan dies on or
after July 23, 1992. The manual will be corrected to also indicate that any endorser is
released from his or her repayment obligation upon discharge of the borrowers loan.

This change is effective for death
certificates received by the lender on or after July 1, 1996, unless the guarantor
provided for earlier implementation. Subsection 8.2.B. of the Common Manual will be
revised to incorporate this correction.

The "Preclaims Assistance Time
Frames" chart in subsection 8.1.J. of the Common Manual will be modified to
add definitions for each heading in the chart. The following new definitions will assist
lenders to comply with the preclaims assistance time frames established by each guarantor:

PRECLAIMS ASSISTANCE
TIME FRAMES

Preclaim Request Period1

Preclaim Cancellation Date2

Skip Preclaims Assistance
Available3

Deadline for Refiling
Rejected Preclaim4

Updated Preclaim Delinquency
Date5

1

The period of time (expressed in
number of days delinquent) established by a guarantor for a lender to request preclaims
assistance. If preclaims assistance is not requested during this time period, the loan may
be subject to an interest penalty if a claim is later filed and paid.

2

If the delinquency date falls
below this number of days delinquent, the lender must notify the guarantor to cancel the
request for preclaims assistance

3

The period of time (expressed in
number of days delinquent) established by a guarantor in which a lender may request skip
tracing from the guarantor. An entry of "All" or "Any" specifies that
skip preclaims assistance is available throughout the life of a loan. An entry of
"None" specifies that the guarantor does not offer skip preclaims assistance.

4

The deadline (expressed in the
number of calendar days from the date the lender receives the rejected preclaims
assistance) established by a guarantor for the lender to refile the request for a
preclaims assistance that has been rejected by the guarantor. An entry of "None"
specifies that the guarantor has no time constraints for refiling the request by the
lender.

5

Indicates whether or not the
guarantor must be informed of any changes in the delinquency status of the loan, even if
the delinquency is not reduced below the point at which the guarantor requires preclaims
assistance to be canceled.

The new definitions of the headings of
the "Preclaims Assistance Time Frames" chart are effective retroactive to the
effective date of the Common Manual.

SAMPLE SAMPLE
SAMPLE SAMPLE SAMPLE SAMPLE
SAMPLE

PRECLAIMS ASSISTANCE TIME FRAMES

Guarantor

Preclaim Request Period1

Preclaim Cancellation Date2

Skip Preclaims Assistance Available3

Deadline for Refiling Rejected Preclaim4

Updated Preclaim Delinquency Date5

Student Loan Guarantor A

80100

60

80100

10

None

Student Loan Guarantor B

5070

30

60

30

Any Change

Student Loan Guarantor C

60-90

60

All

None

None

1

The period of time (expressed in
number of days delinquent) established by a guarantor for a lender to request preclaims
assistance. If preclaims assistance is not requested during this time period, the loan may
be subject to an interest penalty if a claim is later filed and paid.

2

If the delinquency date falls
below this number of days delinquent, the lender must notify the guarantor to cancel the
request for preclaims assistance

3

The period of time (expressed in
number of days delinquent) established by a guarantor in which a lender may request skip
tracing from the guarantor. An entry of "All" or "Any" specifies that
skip preclaims assistance is available throughout the life of a loan. An entry of
"none" specifies that the guarantor does not offer skip preclaims assistance.

4

The deadline (expressed in number
of calendar days from the date the lender receives the rejected preclaims assistance)
established by a guarantor for the lender to refile the request for preclaims assistance
that has been rejected by the guarantor. An entry of "None" specifies that the
guarantor has no time constraints for refiling the request by the lender.

5

Indicates whether or not the
guarantor must be informed of any changes in the delinquency status of the loan, even if
the delinquency is not reduced below the point at which the guarantor requires preclaims
assistance to be canceled. An entry of "None" specifies that the guarantor does
not require an update on the preclaim delinquency date.